Advance Auto Parts to Shut Down Over 700 Stores Amid Financial Struggles

Advance Auto Parts has announced plans to close more than 700 locations as part of a restructuring strategy to stabilise its finances. The decision follows disappointing earnings that fell short of analysts’ predictions, causing the company’s stock to drop nearly 5% in premarket trading.

The closures will include approximately 500 corporate-owned stores and 200 independently operated outlets, though the company has yet to release a comprehensive list of affected locations. Advance Auto Parts, which operates around 5,000 stores nationwide, described the move as a step toward executing its “strategic plan to improve business performance.”

This marks the second consecutive quarter in which the retailer has revised its annual outlook downward. The company cited ongoing challenges, including economic uncertainty and consumer pullback, as reasons for its struggles.

Turnaround Efforts and Broader Retail Trends

The nearly century-old auto parts retailer has been attempting a turnaround for the past year. Recently, it sold Worldpac, an automotive parts wholesaler, for $1.5 billion to simplify its operations and focus on its core business.

Advance Auto Parts’ decision aligns with a broader trend of store closures across the retail sector. According to Coresight Research, 6,189 store closures have already been announced in 2024, surpassing last year’s total of 5,553. Analysts predict this year may see the highest number of retail closures since 2020, when the pandemic caused widespread disruption.

Economic Pressures Affecting Retailers

Retailers like Advance Auto Parts are grappling with waning consumer spending as inflation, high-interest rates, and economic uncertainty weigh on buyers. Many customers have reduced discretionary spending, opting to prioritise essentials over non-essential purchases.

The post-pandemic surge in retail spending during 2021 and 2022 has subsided, leaving many companies struggling to maintain profitability. Rising borrowing costs and elevated prices have further strained household budgets, impacting demand for items like automotive parts, furniture, and electronics.

Despite these challenges, Advance Auto Parts remains focused on its restructuring plan, aiming to position the company for long-term growth. Whether these efforts will be enough to reverse its fortunes remains to be seen.